Shareholders 101 What Rights Do You Have?

Let’s say you own shares of an excellent company. And this company, for many reasons, is something you want to manage hands-on. What thing can you and can you not do? Shareholders have rights. But what rights do you have? Before we answer that, keep in mind that not all stocks are the same. That is, some of the following might be exclusive to only one kind of stock. Common Stocks Common shares, as the name suggests, are the most common stocks for investors. These shares often give voting rights in general meetings. Firms can have more than one class of common stocks. Of course, for each type, the voting rights differ. Some shares offer no voting rights on corporate matters. Preferred Stocks Preferred shares, meanwhile, usually don’t provide the same voting rights as the common shares. On the other hand, preferred shares pay generally fixed, regular dividends. The payout is also generally higher than those of ordinary shareholders. Even when a company slashes back its dividend for common shareholders, preferred stockholders still receive the same number of dividends. Nevertheless, this depends on the kind of dividend the company is willing to give. Lastly, preferred shares rank higher than common shares when it comes to priority and debt repayment. In case the company goes bankrupt, preferred shareholders are paid first before other shareholders. Now, those aren’t the only rights you can get. Let’s go through these benefits again and discuss them one by one. Voting Power Shareholders have the right to vote on various company decisions, such as electing a new leader, mergers, acquisition, or even liquidation. The voting happens during the company’s annual meeting. Ownership of the Company When you own shares, in fact you own a part of the company. Therefore, you also have the right to a portion of the assets that the company owns. Of course, the amount depends on the number of shares you own. You see a return in your investment as the value of your shares increases along with the stock price. Ownership Transfer This right means you can sell your shares on an exchange. The liquidity that comes from this feature is significant. But why? Because such liquidity distinguishes stocks from other investments. For instance, if you own a real estate property and you want to sell it-to liquidate it-the whole process may take months or even years. Whyle shares can be sold withinn hours or even minutes. Dividend Payments Apart from the value appreciation, shareholders also benefit from the possible dividends. The management can either reinvest the profits back into the company or pay them out in the form of dividends. As a shareholder, you got the right to receive such. Although the board of directors usually decides the number of dividends investors may receive, common shareholders typically have the right to receive such payment. Access to Financial Records Last but not least: shareholders also have the right to inspect the company’s financials and records (balance sheet, income statement and etc.) as part of the regulation. Companies release two annual reports. One of them is for shareholders, while the other is for the Securities and Exchange Commission.

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